The Barrel: the essential perspective on global commodities

An impasse has emerged between key operators on the Houston Ship Channel, a critical lifeline for growing US energy exports, as thriving activity in both tanker and container shipping has exacerbated competition for space.

Before August 2018, fog shutdowns were the main hindrance to ship traffic in and out of Houston, the second-largest petrochemical port in the world. However, that month the first container ship to exceed 1,100 feet in length traversed the 23-mile stretch between the entrance to the channel and one of the port’s two container terminals, facing no oncoming traffic, while outbound tankers were forced to sit and wait until it docked.

Oil companies want to become power utilities to meet rising
demand from electricity in transport and from growing populations. The strategy
makes sense, but would also bring risks for regulators and consumers if it were
to create a new breed of gigantic energy-controlling monopolies.

On one hand, watchdogs in developed markets such as the UK should welcome the introduction of relatively new players like Shell and BP to challenge the Big Six conventional utilities. On the other, electricity markets are politically sensitive and oil majors would make easy targets for politicians keen to be seen protecting consumers if profits are put too far ahead of the public good.

The global chasm in crude oil quality supply shows no signs of narrowing, prompting refiners to lighten their slate and leading to a market awash with gasoline , naphtha and LPG.

New restrictions next year on the amount of sulfur in global marine fuels may mean refiners buy even more US shale oil , but this may not put an end to a saturated light ends market. Much hinges on demand.

Minerals producers have made fortunes over the last decade
to slake China’s thirst for raw industrial metals.

But in the future their profits could be hit by the Middle
Kingdom recycling ever-greater quantities of its own ferrous scrap to meet
industrial demand and, more importantly, cut dangerous pollution levels.

Life doesn’t seem to be getting any easier for hydrocarbon producers despite
their return to bumper earnings from firmer prices.

As energy executives prepare to face activist investors at annual general meetings next month, pressure for faster change seems to be coming from all angles. Already under siege to de-carbonise their long-term business models, Big Oil is still struggling to attract talent and overhaul its male-dominated management structures.

Price differentials for heavy, sour Western Canadian Select
on the US Gulf Coast have reached their highest levels on record as Albertan
production curtailment, Venezuelan political upheaval and OPEC production
cutbacks have created a tight supply of heavy sour grades in the region.

WCS at Nederland, Texas, was assessed Monday at the NYMEX WTI CMA plus $3.50/b, its strongest ever differential, according to S&P Global Platts data going back to 2016.

A strict sulfur limit for marine fuels starting in 2020 and its potential to boost US gasoline and diesel prices may have caught the White House off guard last year, but it’s not taking refiners or members of the shipping industry by surprise.

US refiners say they have been preparing for the International Maritime Organization’s 0.5% sulfur cap for a dozen years by making billions of dollars of investments to their plants. They also think US oil producers are well positioned to meet new global demand for lower-sulfur fuels.